Sub-Saharan Africa has been experiencing an episode of high growth since the mid-1990s. Many of the countries of the region have benefited from relatively high commodity prices. One key question is whether higher growth has been accompanied by structural transformation, defined as the pattern of change in economic activity across sectors—from the primary to secondary and tertiary sectors—and across space—from rural to urban areas.

The IMF’s Regional Economic Outlook on sub-Saharan Africa (2012) analyzes one of the dimensions of structural transformation, namely, whether growth has been accompanied by a shift of workers from low to high average productivity activities and sectors. Since on average more than half of the labor force is employed in agriculture in these economies, and agriculture accounts for about one-third of output, average labor productivity in the sector is very low. Thus, structural transformation in Sub-Saharan Africa typically involves increasing the productivity of the agricultural sector, which frees up labor, allowing the shift of agricultural workers to industry and services.

Using data from 1995 to 2010 on agricultural output from the Food and Agricultural Organization (FAO) of the United Nations, GDP by sector from the IMF, and employment by sector from household surveys, the analysis of average labor productivity and the shift of workers across sectors shows that most countries in the region have experienced some degree of structural transformation, although there has been significant variation in its speed and type. In particular, transformation in Sub-Saharan Africa has been slower than that experienced by several countries in Asia: many of the African countries have experienced relatively slow productivity growth in agriculture and a less pronounced shift from agriculture to services and, to an even lesser extent, to manufacturing.

The figure below compares a sample of Sub-Saharan African countries (Cameroon, Ghana, Mauritius, South Africa, and Tanzania) with a group of low- and middle-income Asian economies that have experienced rapid structural transformation and started their growth takeoffs with similar or lower levels of GDP per capita than the average African country at the time. As can be seen, Ghana and Tanzania have experienced declines in agricultural output and employment shares over time, with Tanzania matching the experience of the comparator Asian economies quite closely. Middle-income countries have experienced declining manufacturing ratios for the past two decades, consistent with the process in more advanced Asian countries, where services play an ever increasing role in the economy. Relatively few low-income countries in Sub-Saharan Africa have been able to raise their manufacturing output and employment shares on a sustained basis.

An alternative presentation of the data on employment shares shows broad increases in employment in sectors with higher productivity. The figures below depict annual changes in employment shares against average relative productivity levels for agriculture, manufacturing, mining, and the tertiary sector for Sub-Saharan African and Asian countries, respectively. Points in the lower left quadrants indicate sectors with below average productivity and declining employment shares, while those in the upper right quadrants indicate sectors with above average productivity and rising employment shares.

Structural transformation has taken place to the extent that the observations for manufacturing and services in most countries are located in the upper right quadrant, corresponding to movements from low to high average labor productivity sectors. In fact, only Cameroon and Zambia show change in the employment share in the opposite direction, namely, from high to low average labor productivity sectors. In all the other Sub-Saharan African countries, workers have moved out of the agricultural sector. This suggests that the findings of McMillan and Rodrik (2011), whose analysis of a smaller subset of countries through 2005 found workers moving into low-productivity sectors, may actually be reversed when considering a broader set of countries through 2010.

Country groups within Sub-Saharan Africa display important differences. Most oil exporters, middle-income, and non-fragile low-income countries have seen sustained increases in average labor productivity, often underpinned by rising productivity in agriculture and resulting in a declining share of GDP from that sector. Fragile countries, in contrast, have generally experienced low and irregular growth, largely as a result of conflict; this poor growth is reflected in the absence of significant structural transformation in most of these countries.

Most countries in Sub-Saharan Africa that have been growing faster than in the past have not experienced an increase in the share of manufacturing in employment or GDP, in contrast to the experience in Asia. This pattern is not necessarily surprising. To some extent, it is what would be expected given the differences between the two regions in resource endowments and in comparative advantage: when Asia started its takeoff, most countries were abundant in labor, whereas Sub-Saharan Africa is abundant in natural resources. The challenge is that many of those natural resource sectors, such as mining, are capital intensive and will not provide the jobs needed to accommodate the rapidly growing working-age population in the region.

The recent growth in real wage levels in China, together with Sub-Saharan Africa’s demographic dividend—implying declining dependency ratios in the future—suggest that manufacturing in Sub-Saharan Africa could become increasingly competitive. But irrespective of whether economies grow through strengthening the manufacturing sector (Mozambique, Tanzania) or services (Kenya, Mauritius), it is unlikely that they can do so without first experiencing a major acceleration of agricultural productivity growth.